Despite all the controversy and stumbles, the Paycheck Protection Program (PPP) has accomplished what was intended. More than half a trillion dollars has been doled out mostly to needy small businesses around the country. The Small Business Administration and Treasury have taken steps to cut down on fraud, particularly among larger companies that didn't need the funds. The banks – even the big banks – have stepped up to deliver the loans. And now as the country slowly re-opens, businesses are using that money to cover expenses and recover. The clients that I have who received their PPP money are grateful — it’s been a lifesaver.
The program is a success. So, what's the next, best thing Congress can do? Simply convert the loan program into a grant program. That's right. Forgive the debt. Move on.
The whole point of the loans was to get funds into the hands of small businesses for payroll and other expenses, and that’s been accomplished. But now the attention is turning to forgiveness. Demand has dried up because many business owners are concerned about getting forgiveness. Other small businesses in shut down areas who received loans are running out of time to spend the money. This is not what was intended, and everyone knows it. That’s why the House last week overwhelmingly voted to extend the forgiveness terms and relax the rules. The Senate will take the matter up this week and is expected to do the same. Everyone wants to help small businesses.
Good! Then if you really want to help us, then just forgive the loans. Turn them into grants. Why?
For starters, the House bill not only extends the forgiveness period to 24 weeks, but also allows more expenses to be forgiven. Not only that but amounts that aren't forgiven can now be paid back over five years (it's currently two years) at a 1 percent interest rate. Isn't this kind of a grant already? Why are we pretending it’s still a loan?
Extending the loan program only extends the confusion. There are still questions about the types of payroll costs to be included, the documentation needed, the definition of "rent" and the overlap of PPP with economic injury disaster loans and unemployment. There are still open questions about "re-hiring" and restoring salaries and issuing bonuses and whether an expense was "paid" or "incurred." As more companies apply for forgiveness, more situations will arise, more questions will be asked and more rules will need to be written. Then, when people don’t agree with the rules, they’ll take the government to court.
Who benefits now? A very special group of small businesses: Accountants and attorneys. Is all this back and forth really necessary? No, it's not.
The small business owners I know who received PPP loans have every intention of getting 100 percent forgiveness for those amounts. No one is planning to owe money at the end of their loans. They're filling in their spreadsheets, enlisting their accountants and tracking every dollar. The whole point of the program is forgiveness and forgiveness they will get.
So why are we wasting time and money? Just turn this into a grant already. That way the bankers will be saved from the tsunami of forgiveness applications that will inundate them this summer. The accountants and attorneys will be saved from unravelling all of the anomalies in the legislation (and their clients will save on the fees that will be incurred). Legislators and Treasury officials will be saved from continuously updating their ever-growing list of qualifications, changes and interpretations that they seem to release every other day.
More importantly, business owners can get back to work this summer and attempt to recover from the economic nightmare of the past few months. We won't have to go through yet another expensive, unproductive and unprofitable bureaucratic process of filling out forms, answering questions and providing documentation to get forgiveness. Have we not suffered enough already?
Can the government afford to turn this into a grant? Frankly, and considering that most of these loans will be forgiven anyway, it already is a grant. And when you add up the time, costs and resources that it will take to administer all of the rules for forgiveness, it makes more sense just to clear the books and move on. Considering the trillions already spent on various stimulus bills, what's another $660 billion anyway?
Gene Marks is founder of The Marks Group, a small-business consulting firm. He frequently appears on CNBC, Fox Business and MSNBC.